Lowering Conversion Cost without lowering sales return has always been the advertiser’s dilemma. Increasing return has always been an amazing feat. Advertisers have pushed for the lowest conversion cost. But at the end of the sales day, they paid closer attention to sales volume and return than conversion data. As professional Adwords managers, its expected that we’ll be asked to lower conversion cost for our clients. Now at what cost can we do this? The fastest way to lower conversion cost is to lower CPC and the fastest way to do that is to lower the keywords bids and consequently lower ranking, exposure, traffic, and sales return.
So in our business, the client has passed the dilemma onto us. How are we to manage client expectations with lower conversion costs while increasing the sales revenue?
The trick is to create a separation between strategies that lower conversion cost by lessening exposure levels and strategies that lower conversion cost by weeding out unnecessary ad spend costs.
Ways to lower conversion cost by lowering exposure levels (Lowering Levels of Return):
1. Decrease bid and ranking.
2. Delete or pause keywords, adgroups, and campaigns that do produce some conversions.
3. Add stricter match settings to keywords.
4. Turn on conversion optimizer to lower conversion cost.
5. Turn off search or content networks that convert.
6. Lower producing campaign budgets.
7. Implement position preferences.
The above should be last considered for the purpose of lowering conversion cost.
Ways to lower cost per conversion by weeding out wasted spend and increasing conversion rate:
1. Running Search Query Reports and adding in negative keywords to qualify buyers.
2. Optimizing your adgroups, keywords, ads, and landing pages for higher conversion rates.
3. Optimizing website pages for higher conversion rates.
4. Delete or pause keywords, adgroups, and campaigns that produce no conversions.
5. Turn off networks or network segments that do not convert.
6. Find irrelevant placements in content network. (use site exclusions)
7. Lower CPC by improving quality score.
8. Have competitive pricing.
You might say, “Great! That’s 15 ways to lower conversion cost.” It’s common that advertisers don’t make the above separation between strategies. In fact, we find its more natural to start doing the things that lower conversion cost the fastest. However, it is problematic when you attempt those before trying the techniques that cut wasted spend and increase conversion rate. When that happens, the only result is lower exposure and inevitably lower sales revenue. You’ll need to exhaust the later resources first and then use the other techniques if the conversion cost remains clearly at levels that are unprofitable.
Don’t be pressured into lowering conversion cost the faster, easier way. Take your time to cut the wasteful spend first so it will be easier to infuse growth into you advertising campaigns later. Once you have lowered conversion costs for your unprofitable keywords, it’s time to restore the growth trends back. Below describes that technique in which this is done.
Increasing the Sales Return through Conversion Cost Strategies
Here’s the kicker. This is the part that every advertiser forgets. Only software remembers to do this. It’s the flip side of the coin; the missing link that, if not facilitated, will lead only lead to lower sales volume over time. This is the opposite force that encourages growth. It is actually done mistakenly when you initially start bidding on keywords. Its by mistake because you haven’t looked at conversion cost yet. You mistakenly bid up your keywords only for the purpose of increasing your ranking sales. Now you’ll do it for the same reason but know when to stop.
When analyzing what do do with conversion costs, it is necessary for advertisers to determine a tolerable conversion cost that when achieved, there is considerable profitability. This is commonly known as Target CPA (cost per acquisition). This is the target marketing cost that when added to COGS (cost of good sold) and subtracted from total revenues, leaves considerable profit. Determining what a reasonable profit margin is will vary between products and services.
Once the target conversion cost or CPA has been established, its important that you increase the bid and ranking as quickly as possible to bring the actual cost per conversion up to the Target CPA level. Here the advertiser recoups lost margins because the return then becomes exponential. More exposure an ad sees at a profitable level, the more profit it can generate. This is why its imperative advertisers choose a happy medium between low profits/high target and high profits/low target.
As soon as advertisers do this, they maximize the profit margins and reverse the trend for lost sales. They stabilize the downward sales trend and reverse the pattern with growth in revenues.
